It’s no secret that a lot of people probably wish they could save some money on a regular basis. It’s on their list of things they know they have to do this year. But, for one reason or another, they just can’t get it done.
Does this sound familiar?
If so, you may be like many Americans who face the challenge of saving money and have little in their accounts. According to this survey of 8,000 people, 57 percent said they didn’t even have $1,000 saved.
Your savings account serves as a cushion against the mishaps that occur in everyday life. From car trouble to losing your job, not having anything substantial in your savings is a stressful situation.
Finance experts typically suggest having a cash cushion of at least three to six months of living costs saved, with some even recommending a year’s worth of living expenses saved. That comes out to way more than $1,000.
Saving money is a challenge
Why do people find it so difficult to save? A part of the reason comes from not knowing how to do it or where to start, and when things are unclear, difficult, or boring, people tend to procrastinate.
Even though saving money isn’t rocket science, there are strategies and methods that provide guidance so you can make it a regular habit. These are five ways you can save money each month.
1. Open a free, high-yield savings account
If you’re managing to save something each month, you’re in a better position than the survey respondents, but where are you putting that money? Are you leaving it in your checking account and exposing it to spending temptations, or is it in a savings account with a paltry interest rate? If you’re not familiar with the interest rates on savings accounts, the average return from the big-name banks is a paltry 0.06 percent.
When deciding on a savings account, consider opening one at an online bank that has a way better interest rate than 0.06 percent. CIT Bank’s high-yield savings account offers an impressive 1.55 percent return, which is one of the most competitive interest rates out there.
Another nice perk is that CIT Bank doesn’t charge any monthly fees for the savings account but you need a minimum opening deposit of $100. Think of it as your first step to saving $1,000.
2. Set up automatic transfers from your checking to savings
After you open your CIT Bank savings account, make sure to set an automatic transfer each month so that a portion of your paycheck goes directly into your savings account. This is a minimal-effort way to start saving.
One of the main reasons why automatic transfers work so well is because you’re not physically seeing the money sitting in your checking account. Use the survey as your benchmark and aim to save a minimum of $1,000.
If you’re unsure about how much to start putting away for each month’s automatic transfer, start small and increase the amount as the months go by. As an example, you can start with 5 percent of your take home pay to go directly into savings.
After a month or two, assess the situation and see if you can save more. Increase it by another 5 percent so you’re now saving 10 percent of your income each month. Continue increasing it as much as your budget will allow.
If you are an employee at a company, ask your accounting department if you can split your paycheck so a specific portion goes directly into your savings account on payday.
3. Extra cash goes into your savings, period
In 2018, make the conscious decision to put away all extra cash that comes your way into your online savings account. This includes cash gifts, tax refunds, bonuses and extra income from side gigs.
4. Seriously, take advantage of your 401k
A study by the Census Bureau showed that only one-third of workers are actually saving money in a 401(k) or tax-deferred retirement plan.
Thank your lucky stars if your company offers a 401(k), and start contributing to it this year.
Similar to the savings strategy, aim to save incrementally if taking out a portion of your paycheck will be a challenge. The goal is to work your way up to eventually maxing out your account.
If your employer offers a match, even better. Even if it’s not a lot, this is free money you’re essentially throwing away by not taking advantage!
5. Write down your debts and figure out which ones to pay off first
Do you have five different credit cards with different interest rates and looming student loan debt too?
Create a list of your debts, with interest rates, and then start paying them off, based on highest interest rates. Most likely your credit card debt will have a higher interest rate than your student loans, so prioritize making larger payments on that, and get rid of it as quickly as you can.
There are two widely-known debt payoff methods, which include debt avalanche (paying off high-interest debt first) or debt-snowball (pay off smallest balances first) to obliterate debt.
It doesn’t really matter which method you choose, as long as you stick with it and pay it off in a timely fashion.
This means you should pay more than the minimum amount each month, and once you pay off one debt, move on to the next one.
Be intentional about saving money
Saving money boils down to how intentional you are and the task becomes a lot more clear and motivating when you write it down and understand how much you need to save.
Setting up a savings account that offers a high return from CIT Bank is a great place to house your money while you diligently work to sock away enough cash to be comfortable in the face of life’s uncertainties.